By Jen Singh, Solicitor – [SOURCE]
The Federal Court’s recent decision in Australian Securities and Investments Commission v AMP Financial Planning Proprietary Limited [2022] FCA 1115 resulted in AMP Financial Planning Proprietary Limited (AMP) being ordered to pay a total of $14.5million in damages after five companies that are, or were, part of AMP were found to have contravened section 12DI(3) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) by charging fees for financial services that were not provided during the period of 31 July 2015 to 30 September 2018.
The five relevant defendants have admitted to contravening the relevant provisions of the legislation. As per Moshinsky J’s judgment:
‘6 The defendants have admitted that they contravened the relevant provisions of the legislation. Specifically, it is agreed between the parties that:
- each of AMP Financial Planning, Hillross and Charter (together, the Advice Licensees) contravened s 12DI(3) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) and s 912A(1)(a) and (c) of the Corporations Act 2001 (Cth);
- each of AMP Superannuation and AMP Life was knowingly concerned in the Advice Licensees’ contraventions of s 12DI(3) of the ASIC Act, within the meaning of s 12GBA(1)(e) of the ASIC Act (as in force during the Relevant Period); and
- AMP Superannuation contravened s 912A(1)(a) and (c) of the Corporations Act.’
Due to the admissions made by the defendants, the purpose of the hearing before the Court was to determine the issue of penalty. ASIC sought that penalty of $17.5 million while the Defendants proposed a penalty of $4.6 million. Moshinsky J’s judgment notes that the defendants co-operated with ASIC during the course of ASIC’s investigations and during the course of the proceeding, thus avoiding the need for a trial on the matter of liability.
In determining an appropriate penalty, the Court paid mind to several factors. Notably:
- The maximum pecuniary penalty in respect of a contravention of s12DI(3) of the ASIC Act was $1.8 million for the period between 31 July 2015 and 30 June 2017, and $2.1 million for the period between 1 July 2017 and 30 September 2018.
- The number of contraventions by each defendant were significant. The total number of contraventions totalled 51,835. As such, applying the maximum penalty to each of those contraventions would result in an extremely large penalty.
- The contravention of s12DI(3) of the ASIC Act was caused by single coding error, and as such, His Honour did not consider that the ‘course of conduct’ principle would be of much assistance in determining an appropriate penalty.
His Honour came to the view that the contraventions of s12DI(3) by the defendants were extremely serious, involved a large number of contraventions over a long period of time and impacted a significant number of members. His Honour opined that while the conduct was not deliberate, it was still extremely serious.
His Honour found that the penalty proposed by the Defendants was inadequate for the purposes of specific and general deterrence. His Honour also took into consideration the interrelationship of the conduct across the defendants, and the fact that the defendants are members of one group, however an adjustment on the basis of the totality principle was not applied.
The judgment addresses this as follows:
‘149 I have considered whether any adjustment is required on account of the totality principle and do not consider that any adjustment is required. It was submitted by the defendants that the totality principle should be applied to the total penalty imposed on all the defendants, in circumstances where they are members of the same group, and the problem arose from a single coding error. The totality principle is usually expressed in terms of a particular wrongdoer: see, eg, ASIC v Westpac at [139]. The defendants have not cited any authority for the proposition that it applies in the context of multiple defendants. In any event, as indicated above, I have taken into account the fact that the defendants are members of one group, and the interrelationship of the conduct across the defendants.’
As such, it was found that the appropriate penalty for the Court to impose would be in the quantum of $14.5 million.
In addition to the pecuniary penalty, the Defendants are required to publish a written adverse publicity notice pursuant to section 12GLB(1)(a) of the ASIC Act and were required to pay ASIC’s costs of the proceeding as agreed or assessed.
